Banks are an integral part of our economy. They keep our money safe, pay interest on our savings, and lend us money to buy a house.
But they are also a profit-seeking business.
One of the many ways banks make money is fees. These fees may seem small, but they add up to a lot. In fact, even wealthy celebrities rant about it.
“[My bank] They’re pulling $28 a month out of my account for no reason,” top comedian Bill Burr told Joe Rogan on an episode of the Joe Rogan Experience podcast.
Burr says he didn’t notice it at first. But when he did, he confronted his bank about it.
Do not miss it
Given that Burr was charged a monthly fee for five years, you would expect his bank to pay him back in full. But the bank said their records only go back four months to him and they can only get a refund for those four months.
“It’s ridiculous,” Burr says. “The bank looks like it’s on you because I didn’t catch it.”
Banks have many ways to charge fees these days. Here are three types of “sneaky” bank charges and how to avoid them.
Maintenance costs
Just being a bank customer can incur maintenance costs. This is the fee for opening an account.
Personal finance expert Dave Ramsey once called maintenance costs “the meanest thing.”
“You agree when you open an account, but sometimes you don’t realize it until it’s on your statement six months later.”
However, there are usually ways to avoid paying this particularly unobtrusive bank fee. For example, some banks waive account maintenance fees for customers who maintain a certain minimum balance. If your account balance exceeds that threshold, you don’t have to pay the maintenance fee.
Some banks may also waive maintenance fees for customers who have direct deposits into their accounts.
Always read the fine print before opening an account to see if your bank charges a maintenance fee and how to avoid it.
Overdraft fee
Credit cards let you spend money you don’t have, but we all know that double-digit interest rates can cost you a lot. But did you know that debit cards also allow you to spend more money than you have?
So if you have $100 in your checking account and swipe your debit card to buy that $150 item at the store, the transaction will still proceed. However, you may incur overdraft fees.
What is the charge for that?
Stay on top of your market: Don’t miss the latest news and a constant stream of actionable ideas from Wall Street’s top companies. Sign up for the MoneyWise Investing newsletter today for free.
A typical overdraft fee is about $35, according to the Consumer Financial Protection Bureau.
Of course, you will also have to pay back the amount you borrowed. If you use your account too much, you are more likely to pay extra charges.
It’s easy to avoid paying overdraft fees. Keep an eye on your account balance and don’t spend more than that.
You can also ask your bank not to liquidate your account if it is overdrawn.
Not Enough Funds (NSF) Fee
As the name suggests, the Insufficient Funds Fee applies when you do not have enough funds in your account. Usually you have to pay a check written against it. This is commonly known as a check bounce.
Obviously, avoiding NSF fees is the same as avoiding overdraft fees. Monitor your checking account. If you have a low balance, we recommend that you transfer money from your savings account before writing the check.
Many banks also let you set up automatic alerts to notify you when your account balance is low. You can usually customize the amount that triggers the alert. This way, you will know when to move money from your savings account to your checking account. Or you can cut back on your spending until your next paycheck arrives.
Another thing to note about NSF fees is that the checks you write may be cashed later.
For example, you write a check for $500 on the 1st of every month and the payee cashes it on the 15th. If you forget your check and your account balance drops below $500 before your bank processes your payment, you may incur an NSF fee.
what to read next
-
‘The world should worry’: Saudi Aramco, the world’s largest oil producer, issued dire warnings about ‘very low’ production capacity. Here are three stocks to protect
-
‘This truck can’t do what a regular truck does’: YouTube star says getting towed by Ford’s new electric pickup is a ‘complete disaster’ in viral video, but Wall Street still says these three I love EV stocks
-
‘Can’t wait to get out of the house’: Nearly three-quarters of pandemic homebuyers regret — things to know before making an offer
This article is for informational purposes only and should not be construed as advice. It is provided without warranty of any kind.
